Mexico offers onshore fields for latest auction

The latest tender in Mexico’s historic opening of its energy industry to private investment may not attract the most recognizable names in the business, but it could be a chance for smaller companies to get in on the action.

The tracts offered earlier this month include 26 mostly smaller onshore properties in three basins — the Burgos just south of the Texas border, the Tampico-Misantla farther south along the Mexican Gulf Coast and the Salinas-Sureste along the Bay of Campeche.

Regulators also unveiled a new model contract and eased the requirements for participating. Combined, the steps will make the bidding round more attractive to smaller companies.

“If this round was set up with the purpose of allowing smaller Mexican-backed or -operated E&P companies access into Mexico, then certainly it will provide that,” said Ivan Cima, an analyst at energy consulting firm Wood Mackenzie.

Since the 1930s, Mexico’s state-owned Petróleos Mexicanos, known as Pemex, has held a monopoly on the Mexican oil and gas sector. It will remain the largest player in the country even when private investors enter, but it no longer will have a monopoly.

The smaller fields Mexico is offering in the latest auction round might draw bids from new Mexican companies backed by private equity or partnering with others that have oil and gas know-how to exploit the resources. The government has designated 22 of the 26 fields as what it calls Type One, with less than 100 million barrels of oil equivalent in place. A handful are classified as Type Two with a larger estimated haul, but few are high-potential, Wood Mackenzie analysts said.

“You might see some juniors and independents interested in some Type Two fields. We don’t see this as an opportunity for majors,” said Matt Blomerth, also an analyst at Wood Mackenzie.

For this auction, the deals are structured as licensing contracts, under which producers typically keep the hydrocarbons they extract but pay royalties and other fees. The industry often prefers that arrangement to production-sharing contracts, lawyer Gabriel Salinas said.